Let the fussin’ and cussin’ begin. You’re about to embark on the annual pilgrimage to income tax purgatory and will spend several weeks gathering proof of your deductions. In that process, remember the words of a wise tax sage, “Loopholes aren’t illegal. Anything in the IRS code is there to use.” In other words, don’t give more to the government than you have to. Here’s a list of items that might get overlooked:
- Out-of-pocket charitable donations. It’s easy to remember big amounts you contributed. But the government allows for smaller items, such as buying stamps for your child’s school fundraiser or ingredients in food you prepare for a nonprofit. Also, don’t forget to list the miles you drove in your charitable endeavors.
2. State taxes paid. If you owed state taxes when you filed your 2015 state return, include that amount on your 2016 return.
3. Points paid when buying a home.
4. Medical expenses exceeding 10% of Adjusted Gross Income. If you had substantial medical expenses in 2016 its’ worth the time to see if they are greater than 10% of Miles traveled when you incurred those medical expenses are also part of the equation.
5. Expenses for a qualified home office. According to IRS Publication 587 these include but are not limited to: repairs, security system installation and monitoring, utilities and service, and mortgage insurance premiums.
6. Deduction for state and local sales taxes (usually used in states without a state income tax).
7. Gambling losses. Yes, you can deduct your losses on those sure bets that went south, but you can’t deduct more than your winnings. If you won $5k and lost $8k, your maximum deduction is $5k. If you won $0 and lost a lot you get to deduct nothing. You’re just out of luck. (Remember, this is the government we’re dealing with.)
Alhambra Investment Partners does not give tax advice, so check with your tax professional to see if these deductions and others are available to you.
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